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The Top Ten Family Wealth Transfer Mistakes

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Most Canadians intuitively believe they should have a wealth transfer plan, but most of us have not created one.

A business owner thinks of how to pass on the business to children at retirement.  A husband thinks about what will happen to his family if he has a heart attack and dies.  A wealthy retired couple wants to contribute to a favourite charity.

Few people want to pay extra tax while they’re alive, let alone on their wealth when they’re gone.

Yet surprisingly, an Ipsos Reid survey found that almost half of Canadians have never had a detailed discussion with their family about their final wishes.  Even more surprising is that fewer than 40% of Canadian boomers have a will!

Discussing ones inevitable death can be uncomfortable, but the failure to do so can lead to stress and hardship on loved ones during a very difficult and emotional time.

A wealth transfer strategy is an integral part of any comprehensive financial plan.  It provides:

  • Peace of mind that family is protected.
  • Ensures your assets are passed on in a manner that is consistent with your values and beliefs.
  • Can reduce excessive taxation and probate fees

This is the first installment of a series of more detailed articles on the topic of wealth transfer.

The Top Ten Wealth Transfer Mistakes

1.   Failing to have a current will

A will or other transfer vehicle needs to be in place, and these documents need to be updated when circumstances change.

2.   Having no integrated game plan

Wealth transfer involves legal, financial, tax, and emotional issues.  All must be balanced for the plan to be effective.

3.   Failing to consider all assets

All assets that must be distributed need to be considered, and their valuations need to be kept current.

4.  Not considering the tax consequences of wealth transfer and protecting assets

This includes improperly owned life insurance.  Insurance can be an important planning vehicle, but not considering who owns it could cost your estate or business.

5.   Ignoring the need for liquidity

An estate with a large portion of illiquid assets will be difficult to settle quickly and may not meet the goals set out in the original plan.

6.    Not taking into consideration all the potential beneficiaries

This includes people who either should be looked after or must be looked after.

7.    Keeping too much money in the estate

Distributing assets prior to death may be an important task.

8.    Not considering creating a living legacy

Making use of assets to benefit others while alive is an important consideration.

9.    Not considering the potential tax consequences of gifting or asset transfer between family members

Beware the attribution rules!  This failure can also affect family businesses, if an attempt to distribute the assets equally among family members compromises the business.

10.   Not taking steps to reduce taxes

Individuals have the right to find ways to decrease the amount of tax paid, increasing the amount available for distribution to people & causes that are important to them.

Article written by Brad Mol, Senior Wealth Advisor at TriDelta Financial

Tel: 905 845 4081 Email: brad@tridelta.ca

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